City trader James Sanders appeared to have it all – a £9million property portfolio including a mansion in Kensington, a stable of fast cars and a multi-milllion pound business.

But the 35-year-old City trader and his glamorous wife Miranda, 34, were in fact funding their luxurious lifestyle from illegal deals, thanks to secret financial information passed on by her sister and brother-in-law in America.

Heading for a fall: James Sanders (left) and his wife Miranda (right) were sent to prison last June. They have each been ordered repay large sums of money within six months or face being jailed for another four years

Yesterday the couple swapped their
£5million Georgian mansion for a prison cell after both were jailed for
insider dealing.

Sanders was sentenced to four years, while his wife got
ten months.

Southwark Crown Court heard how the
pair pocketed more than £1.5million by placing bets on the stock market
based on insider tips gleaned from Miranda’s brother-in-law Arnold
McClellan, 52, a partner with financial firm Deloitte who handled major
US company takeovers.

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Sanders, who ran his own brokerage
firm in London earning £1million a year, gleefully boasted: ‘I’m the
golden boy coming home smelling of roses’.

Luxury: Sanders is believed to have purchased this five-storey £5million property in Kensington, west London

The father of two used his profits to
splash out on a five-storey property worth £5million, originally
intended as an investment.

He treated the Georgian mansion, just
off Kensington High Street, to a £1million makeover complete with a
£35,000 wine cellar in the basement.

When he snapped up the property for
£1.1million less than the asking price, he bragged that his winning
mantra was ‘buy at the point of maximum fear’ and said: ‘Once the credit
crunch is over I’m going to be quids in.’

Sanders also used the cash to pay off
his mortgage on the couple’s £3.75million townhouse in Holland Park and
allocated himself a £100,000 ‘car fund’ to pay for his 328 GTS and 575M
Maranello Ferraris, a Maserati and Bentley.

When investigators raided his home,
they found an extraordinary handwritten list in which Sanders
meticulously set out his spending of £50,000 on Rolex watches, luxury
holidays, designer clothing and fine wines.

He also splurged £60,000 on a diamond
for his wife, £150,000 on improvements to the Holland Park home and
£60,000 on premium bonds, while discussed giving his father, Tim, and Miranda’s
father, Michael, £20,000 each.

Yesterday the court heard how the
couple got rich thanks to tips on forthcoming acquisitions passed on by
Miranda’s millionaire older sister Annabel McClellan, 39. She is now
serving 11 months in a US federal prison for obstructing an
investigation into the racket.

The housewife, who lives in San
Francisco, had daily conversations with her sister in which she was said
to have passed on confidential information from her husband about
transactions involving five US companies.

The two families were exceptionally close and enjoyed equally opulent lifestyles.

Co-conspirators: James Swallow (right), a fellow director and founder of
Blue Index, was jailed for ten months. Annabel McClellan (left) was
sentenced to 11 months in a US federal prison for obstructing an
investigation into financial tips

McClellan, a mother of two, met her
husband while working in Deloitte’s London office when she was in her
early 20s. The couple married and moved to America in 1996, where she
divided her time between renovating the family’s $2.1million
(£1.3million) home in an upmarket neighbourhood, Bikram yoga and doing
charity work.

But as investigators in the US and
Britain were closing in on the insider dealing, the bored housewife
began developing a sexually explicit social networking business. Called
‘My Nookie’, it was billed as 'the app your sex life and social life
can’t be without'.

Their scam was uncovered when the
Financial Services Authority in Britain launched its first-ever joint
investigation with the United States Securities and Exchange Commission
(SEC), which led to Sanders’s brokerage firm, Blue Index, being shut
down and the couple’s assets seized.

Investigators discovered 26million
emails and 24,000 phone conversations which were automatically recorded
at the Blue Index office. Many referred to deals based on the tips,
while in some Sanders laughed at the prospect of getting caught.

List: Investigators from the Financial Services Authority recovered James Sanders' written spending plan, which he had scribbled on Blue Index headed notepaper above the slogan 'The best way to trade'

He boasted to his father, a double
glazing salesman: ‘There’s no doubt in my mind we’re gonna absolutely
cane it over the next year or two because these tips are f***ing
brilliant.’

Peter Carter QC, prosecuting, said the
plan was for Sanders to pay half of the profits to the McClellans, but
investigators were unable to trace any money transfers.

The taped telephone calls in fact
suggest that Sanders considered cheating the couple by siphoning off the
cash into a secret account.

After the tips made his clients more
than £12million, Sanders planned to sell his firm for £8million, but he
was arrested in May 2009 before he could cash in.

When questioned, Sanders claimed he barely knew Mr McClellan – but when they left Bishopsgate police station
his wife immediately ran to the nearest phone box to call her sister.

THE CALLS THAT TRAPPED 'GOLDEN BOY'

On October 30, 2006, he introduced his father Tim to the insider dealing scheme, telling him: ‘It’s a good one. It’s Annabel, Miranda’s sister, her husband is the head of Deloitte & Touche in the whole of the US, he’s the sixth most senior person out of 100,000 employees in the country.‘He’s done the deal on a US company that’s $23.77 at the moment and they’re going to be bid for at $28 next week, 100 per cent so I’m going to do something quite big on it... (Arnold McClellan earns) $1million dollars a year, earns nearly as much as me poor fella. He’s 47, he’s worked 18 hours a day for 35 years!’

On November 1, his father joked: ‘Is this not insider dealing?’ ‘Urm, no not really,’ replied Sanders laughing. ‘Yeah, well try proving it,’ his father said. Sanders added: ‘Yes exactly.’

On March 16, 2007, Sanders told his father: ‘I’ll be sending you a cheque for your birthday this year... I’m the golden boy coming smelling of roses.’

On April 2, 2007, Sanders told his father: ‘There’s no doubt in my mind we’re gonna absolutely cane it over the next year or two because these tips are ****ing brilliant.’

On November 7, 2006, Sanders asked his wife: ‘Any more tips from Annie?’ Miranda replied: ‘No.’

Yesterday Andrew Radcliffe, defending
Sanders, said: ‘He has expressed himself in this way that he acted out
of greed, arrogance and a feeling at the time of invincibility.

‘He is embarrassed at the person he
was and totally ashamed of his own conduct and also that he involved and
implicated others unjustly.’

Mr Justice Simon jailed Sanders for
four years and he was disqualified from running a business for five
years after admitting ten counts of insider dealing between October 2006
and February 2008.

He told Sanders: ‘You were the driving
force behind the criminality. You knew how the system worked and you
traded jointly with your wife so as to generate large sums for the
direct financial benefit of the two of you.’

Sanders’s wife, who runs an exclusive
property business in Kensington and Chelsea, remained impassive as she
stood by him in the dock, impeccably dressed in a tailored trouser suit
and stilettos.

She received a ten-month sentence for three counts of insider dealing. Both had previously pleaded guilty.

James Swallow, 34, a fellow director
of Blue Index, was also jailed for ten months after admitting three
counts of insider dealing.

Senior trader Christopher Hossain, 36,
and Sanders’s friend Adam Buck, 35, were cleared of any involvement in
the scandal after a trial last month.

In America Annabel McClellan was
jailed in November last year after admitting obstructing justice for
lying to SEC investigators.

She also paid $1million (£635,000) to
settle an SEC lawsuit which alleged that she and her relatives netted
$23million (£14.6million) from illicit trades.

As part of the settlement, in which
she did not admit wrongdoing, the SEC agreed to drop its claims against
her husband, who was allowed to quietly retire from his high-powered
job.

The couple now face a confiscation hearing in which the FSA will seek to claw back all of their assets.

They have already sold their Holland Park home and their Kensington mansion is on the market.